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MINNEAPOLIS - In a bid to shore up its third-party logistics capability, Supervalu, Inc. has signed an agreement to acquire Total Logistics, Inc., a national provider of integrated third-party logistic services with calendar 2004 nine-month revenues of $253 million.
Under the terms of the agreement, Supervalu will pay $28.50 in cash per share of Total Logistics stock and will assume the company’s outstanding debt, estimated to be about $68 million at closing. Following the close of the tender offering, any shares not tendered will be acquired at $28.50 per share in cash in a subsequent merger. With about 5.7 million fully diluted shares outstanding, the aggregate transaction value is about $233 million, including assumed debt and transaction expenses. The acquisition, subject to certain conditions, is expected to close in early February. Supervalu said it expects the acquisition to be slightly accretive to fiscal year 2006.
Lazard was the financial adviser to Supervalu, and will serve as the dealer manager on the tender offer, while William Blair & Co. served as financial adviser to Total Logistics.
Jeff Noddle, chairman and c.e.o. of Supervalu, said in a statement: "We have been looking for the right partner to obtain critical mass and solidify our commitment to third-party logistics, and we have found the perfect fit in Total Logistics, Inc. This company has an impressive position in third-party logistics with its proven management team, a blue-chip customer base, and a full suite of integrated service solutions. The combination of Supervalu's scale and supply chain competence. . .with Total Logistics, Inc. and its nationally recognized reputation in third-party logistics will unlock new growth opportunities."
In a conference call yesterday, Noddle said that within six months he expected Supervalu and the acquired company to begin marketing themselves as a combined entity, and added that the intention was for Supervalu to eventually expand its supply chain activities beyond the food industry.
Michael Jackson, the company’s e.v.p., president, and c.o.o., distribution, observed during the call that the third-party logistics industry is “fragmented” and that Supervalu “[sees] an opportunity to be a consolidator.”
Total Logistics, a holding company headquartered in Milwaukee, has two wholly owned subsidiaries, Zeeland, Mich.-based Total Logistic Control (TLC) and North Prairie, Wis.-based Zero Zone, which together employ about 3,000 people.
TLC, which is responsible for most of Total Logistics’ revenues, offers services including warehouse management, transportation, procurement, contract manufacturing, and logistics engineering and management services. TLC's customers consist of local, regional, national, and international firms engaged in food and beverage manufacturing, consumer and industrial product manufacturing, wholesale distribution, and retailing. The company manages more than 30 facilities around the country providing end-to-end supply chain solutions to customers.
Zero Zone is a niche manufacturer of refrigerated and frozen display cases serving grocery, convenience, dollar, and drug store chains. In addition, the company produces refrigeration systems and racks to power and control the refrigeration systems, electrical panels and standby power for both retail and industrial applications. Supervalu e.v.p. and c.f.o. Pamela K. Knous mentioned during the conference call that Zero Zone equipment was being installed in a new Farm Fresh store “as we speak.”
Noddle also noted that 2005 marks Supervalu’s 135th anniversary, for which the company has adopted the catchphrase “fresh thinking,” and that to mark this milestone, Supervalu will ring the closing bell at the New York Stock Exchange Jan. 14.
Supervalu holds leading market share positions across the United States with its more than 1,500 retail grocery locations, including licensed Save-A-Lot locations. The company’s Save-A-Lot format has the No. 1 market position in the extreme-value grocery retail sector. Through Supervalu's geographically diverse distribution network, the company provides distribution and related logistics support services to nearly 4,500 grocery retailers across the nation.